Wondering how freelancers can handle all of their responsibilities during peak time? Obviously, managing own business is not always easy, but it is worth the time. Many freelancers work hard to maintain proper accounts and financial budgeting because at the end of the day, these are the factors we actually work for. The trick is to plan the responsibilities. That’s how it’s done! And you’re not alone in this field. The freelancing industry is increasing at a rate that 50% of workforce are expected to be freelancers by 2021.
In this article, we are going to answer searches from over thousand successful freelancers — managing finance.
WHAT ARE THE FINANCIAL CHALLENGES FACED BY FREELANCERS
Why we are terming them challenges? Because you have to pay both income tax and the self-employment tax. Also an ideal world, clients would pay regularly for your work when they feel you weak. Most freelancers know that payments do fluctuate, and they usually arrive later than promised. As a freelancer, in order to grow professionally, you must plan for your business and search for supportive resources. Essentially, a financial and time management strategy helps you support your journey smoothly. Financial and Accounting plans also serve as a road map for your branding direction. This is important for Successfully establishing your professional service to your target market.
Another major benefits of finance and accounting strategy with the help of some useful resource for your yourself is that rather simply formulating manually and guessing metrics, it forces you to concentrate on your dedicated skills and do the math computationally about your expenses, earnings, taxes and show how much you’ve reached to your realistic goals. Get the proper help you need by adopting at least 6 to 7 good practices while having an overall business plan. If, as a freelancer, you are trying to figure out financial tips and tricks, then it’s time to breathe a sigh of relief. See our quick guide for helping you to overcome any challenges faced by freelancers.
1. Track Your Income
The habit of tracking income manually is a thing we’ve learnt in school to calculate our pocket money. We used to enjoy how the income was increasing year by year. But, according to Small Business Administration (SBA) Office of Advocacy’s FAQ result, 20% of small business fail in their first year because of erroneous tracking of income, which is certain to happen manually. A deep understanding of tracking your income will put you in a better position to prepare for the crests and troughs in the career chart. Most often, freelancers cannot track their income and with time, their expenses gets unmanageable. This ambiguous approach makes their hard earned money unpredictable.
To avoid any such uncertainty or error, it is better to use a proper solution to record your income and use this data to prepare for busy and slow times of the year.
2. Plan Your Expenses
It is also beneficial to know how much you spend and on which factors. Expenses here does not mean that you need to have a fixed amount of spending on essentials(rent, taxes, food, insurance), but flexible expenses that can be controlled as needed. Track past monthly expenses, and find expenses that can be easily reduced as needed. You may also be surprised how much you can save with these instant planning map. It’ll help you to calculate average expenses along with your your average income and set a budget accordingly.
When working from home, you can save a lot of money, otherwise, you must need to spend at office cafeteria, lunch, weekend parties after getting your work done and even at commuting. Freelancers also save a lot of money by choosing shared office space instead of personal office, along with basic co-working office tool which are obtained under a nominal rent plan.
3. Create A Budget
You’re not a monthly earner. You’ve unique way of earning money and your irregular flow of income makes budgeting different, and equally essential. In some months, your income may be more than others, and it may be very tempting to enjoy a large amount of money. However, by setting a personal limit every month to budget your expenditures, you will get more financial protection in the months when your income decreases.
Choose your priorities carefully. Use 50/30/20 model of budgeting i.e. you should allocate 50% of your income for baseline or essential expenses, 30% on variable expenses like clothes, furniture, movies etc. and 20% to be allocated for
Future savings that will serve you as a pension amount or debt. Amount.
4. Manage Your Taxes
It’s a truth that freelancers work from the comfort of their bed or couch at home, garden or from cool café. But among all other differences, one thing that remains same is the fact that freelancers are also liable to pay the taxes for the income they earn, same as business or salaried people as per the income tax act.
For freelancers, this is a bit complicated because freelancers generally tend to have more than one client.
According to the Income tax act, any income that is earned by your intellectual or manual skills is income from a profession. This income will be taxed as “Profits and Gains from Business or Profession.”
The gross income will be average of all receipts you get in the course of carrying out the profession. The income tax slabs for freelancers are the same as those for salaried individuals. The higher your income, the more your tax.
We know, doing your taxes may never be fun, but investing in the right tool can change it from your headache to a manageable tracking — dare we say, rewarding experience.
5. Make A Target For Short-term and Long-term Savings
It sounds like teachers, isn’t? But handling funds wisely allows you to set up emergency funds separately. Short term savings for a visit to the doctor, maintenance charge of gadget and long-term savings plan-such as education funds for kids or buying an apartment. For freelancers, keeping funds for rainy days is as important as buying freelance insurance. Your life is irregular just like a bumpy car drive and hence maintaining a savings will reduce the need to worry about any extra money!
6. Receiving Different Currencies
All around the world, people are moving into short term contracts more than conventional employment. With freelancers, it is important to make things simple and hence a borderless payment method is the necessity.
Integrating a payment tool that can be used on multiple sites is a must. With a tool, you can have the following benefits:
· Allowing clients the ability to pay you in their local currencies
· Have a number of different ways to manage your payment requests
· Accept free in-network payment.
· No extra fees when you receive a payment from different currency
7. Invest in Invoice Generation
Often times, the daunting part of freelancing isn’t the job itself — it’s the process of tracking expenses and actually getting paid in time. If you want to improve the image of your services and get established as a brand then your invoicing should display professionalism while keeping in mind the following points:
· State for not providing timely invoices, often get you less paid than what you deserve.
· Unprofessional, Inaccurate billing for the time spent on tasks
· Manage invoices and keep them available to send anytime, anywhere.
· Track your tasks carefully and send reports to your client after every milestone.
I agree, it might appear little too much of work for one person but fortunately companies now have tools specifically developed to tackle all of your problems. Being a creative professional, your time is your asset and adoption such billing tool eliminates the need of investing your time and energy to time-consuming tasks like tracking and invoicing.
8. Build client trust and professional appearance
Freelancing exist only because client does. Although as a freelancer, it may be difficult for you to spread widely in the industry of your choice, the service you provide after your initial marketing has the ability to influence the types of customers you attract. In order to become a freelancer, no matter where you are, you must maintain certain expectations to ensure that you can build the trust of your clients and continue to excel your professionalism.
Determining what a client demands and how you can meet such needs beforehand is the key of your future success. To begin, outline what, you as a freelancer are responsible for. Incorporating a professional way of signing a Non-Disclosure Agreement, show your customers that you are deeply concerned about their work and keeping things confidential. It makes clients more confident in sharing information with you, enabling you to classify as a professional freelancer.
In a nutshell, freelancing is a great way to follow your passion and earn a living, there are some definite challenges between freelancing full-time and working as an employee. The plus side is that many freelancers have walked in your footsteps before, and there is a lot of personal experiences shared out there on how to overcome some commonly faced challenges by freelancer — to get the most out of your productivity.
Keeping you aware with areas where freelancers generally have a tendency to experience challenges, and accordingly planning an early solution swill assist you to overcome any such issues and you’re going to help yourself dive into the pool (of sharks) as a freelance expert and come out ahead as a successful one.